The Fed paused in September as the housing market spun its wheels. Here are the five things we learned from U.S. economic data released during the week ending September 22.
The Fed kept still but anticipates one more rate hike this year. The policy statement released following this past week’s Fed Open Market Committee (FOMC) meeting described the economic growth as “solid,” job gains as “strong” (albeit slowing), and inflation as “elevated.” The same statement noted that the “Committee remains highly attentive to inflation risks” as it seeks two percent inflation. The FOMC voted unanimously to keep the fed funds target rate at a 5.25 and 5.50 percent range and to continue reducing its Treasury and agency mortgage-backed securities holdings. Released concurrently were the meeting participants’ latest forecasts, which suggest there will be one more 25-basis point rate hike in 2023 and that interest rates will fall over the next three years. The median forecast has the U.S. economy expanding 1.5 percent next year, the unemployment rate inching up to a still-low 4.1 percent, and inflation declining to 2.5 percent.
Sales of previously owned homes dropped in August to their slowest pace since January. The National Association of Realtors reports that existing home sales declined 0.7 percent to a seasonally adjusted annualized rate (SAAR) of 4.04 million units. Sales were down 15.3 percent from a year earlier. Sales fell during the month in the South and West, held steady in the Northeast, and edged up in the Midwest. All four Census regions suffered double-digit percentage sales declines from a year earlier. A culprit has been a lack of homes for sale. Inventories dropped 0.9 percent to 1.100 million homes, the equivalent to a tight 3.3 month supply. The median sales price of $407,100 was up 3.9 percent from a year earlier.
Housing starts wilted in the August heat. The Census Bureau estimates housing starts fell 11.3 percent to a seasonally adjusted annualized rate (SAAR) of 1.283 million units. Starts were 14.8 percent below their year-ago pace. Starts of single-family and multi-family homes declined 4.3 percent and 26.3 percent, respectively. The former were up 2.4 percent from a year earlier. Looking towards the future, the number of issued building permits swelled 6.9 percent to an annualized 1.443 million (which was, nonetheless, down 2.7 percent from August 2022). Completions grew 5.4 percent to an annualized 1.406 million (+3.8 percent versus August 2022).
Homebuilder sentiment fell to a five-month low in September. The National Association of Homebuilders’ Housing Market Index lost five points to a seasonally adjusted reading of 45. An HMI below 50 means more homebuilders see the housing market as “poor” than view it as “good.” The HMI declined and was below 50 in all four Census regions. The single-family home sales and expected sales indices both decreased by six points to 51 and 46, respectively. The traffic of prospective buyers measure shed five points to 30 (its lowest since February). The press release said, “[h]igh mortgage rates are clearly taking a toll on builder confidence and consumer demand.”
Forward-looking economic measures struggled again in August. The Conference Board’s Leading Economic Index (LEI) dropped 0.4 percent to 105.4 (2016=100). The LEI has fallen 3.8 percent over the past six months. Only three of ten LEI components made positive contributions: building permits, orders for civilian nonaircraft capital goods, and new orders for consumer goods. The Coincident Economic Index grew 0.2 percent in August to 110.6 (2016=100), leaving the measure 0.8 percent ahead of its 6-month ago mark. All four CEI components made positive contributions. The Lagging Economic Index also added 0.2 percent to 118.5 (+0.1 percent versus February 2023). Four of seven lagging measures made positive contributions. The Conference Board expects the U.S. economy to “experience a brief but mild contraction.”
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending September 16, 2023, First-Time Claims, seasonally adjusted): 201,000, -20,000 vs. the previous week, +10,000 vs. the same week a year earlier). 4-week moving average: 217,000 (+10.4% vs. the same week a year earlier).
- Construction Spending (July 2023, Value of Construction Put in Place, seasonally adjusted annualized rate): $1.973 trillion (+0.7% vs. June 2023; +5.5% vs. July 2022).
- State Employment (August 2023, Nonfarm Payrolls, seasonally adjusted): Vs. July 2023: Up in 5 states and unchanged in 45 states and the District of Columbia. Vs. August 2022: Up in 32 states and unchanged in 18 states and the District of Columbia.
- Treasury International Capital Flows (July 2023, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$45.6 billion (vs. June 2023: +$233.4 billion; vs. July 2022: -$5.9 billion).
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What We Learned About the U.S. Economy Last Week 